Notes
to Condensed Consolidated Financial Statements
Six
Months Ended June 30, 2017 and 2016
(Unaudited)
Note
1 - Organization and Basis of Presentation
The
consolidated financial statements presented are those of iGambit Inc., (the “Company”) and its wholly-owned subsidiaries,
HealthDatix, Inc. (“HealthDatix”), Wala, Inc. doing business as Arcmail Technology (“ArcMail”) and Gotham
Innovation Lab Inc. (“Gotham”). The Company was incorporated under the laws of the State of Delaware on April 13,
2000. The Company was originally incorporated as Compusations Inc. under the laws of the State of New York on October 2, 1996.
The Company changed its name to BigVault.com Inc. upon changing its state of domicile on April 13, 2000. The Company changed its
name again to bigVault Storage Technologies Inc. on December 21, 2000 before changing to iGambit Inc. on April 5, 2006. Gotham
was incorporated under the laws of the state of New York on September 23, 2009. The Company is a holding company which seeks out
acquisitions of operating companies in technology markets. HealthDatix, Inc. is engaged in the business of streamlining the process
of managing information in the document-intensive medical field for customers throughout the United States. ArcMail provides email
archive solutions to domestic and international businesses through hardware and software sales, support, and maintenance. Gotham
was in the business of providing media technology services to real estate agents and brokers in the New York metropolitan area.
Interim
Financial Statements
The
following (a) condensed consolidated balance sheet as of December 31, 2016, which has been derived from audited financial statements,
and (b) the unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with
the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes
required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended
June 30, 2017 are not necessarily indicative of results that may be expected for the year ending December 31, 2017 or any other
period. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial
statements and notes thereto for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K,
filed with the Securities and Exchange Commission (“SEC”) on April 17, 2017.
Business
Acquisitions
On
February 14, 2017, the Company acquired Healthdatix, Inc., formerly known as HubCentrix, Inc. in accordance with a stock purchase
agreement. Previously, the Company was focused on the technology markets. The Company has tailored its strategy to focus on pursuing
specific medical technology strategies and objectives. The acquisition of HealthDatix, provides the Company with its first
medical technology, WellDatix, a proprietary platform that enables physicians to identify patients eligible for Annual Wellness
Visits which is reimbursed by Medicare. This technology positions the Company to participate in the anticipated accelerated market
needs of the physician community throughout the country. Pursuant to the stock purchase agreement, the total consideration paid
for the outstanding capital stock of HealthDatix was 15,000,000 shares of iGambit restricted common stock, valued at $.07 per
share. The following table presents the preliminary allocation of the value of the common shares issued for HealthDatix to the
acquired identifiable assets, liabilities assumed and goodwill:
|
|
Fair
Value
|
Cash
|
|
$
|
29,584
|
|
Accounts receivable,
net
|
|
|
2,250
|
|
Fixed assets
|
|
|
3,800
|
|
Workforce
|
|
|
60,919
|
|
Software
|
|
|
156,925
|
|
Customer contracts
|
|
|
644,846
|
|
Notes payable
|
|
|
(60,500
|
)
|
Loan payable
|
|
|
(65,000
|
)
|
Goodwill
|
|
|
277,176
|
|
Purchase price
|
|
$
|
1,050,000
|
|
The
results of operations of HealthDatix for the period February 14, 2017 to June 30, 2017 have been included in the consolidated
statements of operations for the three and six months ended June 30, 2017. The following table presents unaudited pro forma results
of operations of the Company and HealthDatix as if the acquisition had occurred at January 1, 2016. The pro forma condensed combined
financial information is presented for informational purposes only. The unaudited pro forma results of operations are not necessarily
indicative of results that would have occurred had the acquisition taken place at the beginning of the earliest period presented,
or of future results.
|
|
June
30,
|
|
June
30,
|
|
|
2017
|
|
2016
|
Pro forma
revenue
|
|
$
|
12,195
|
|
|
$
|
36,989
|
|
Pro forma gross profit
|
|
$
|
(2,423
|
)
|
|
$
|
25,566
|
|
Pro forma loss from
operations
|
|
$
|
(1,486,328
|
)
|
|
$
|
(223,104
|
)
|
Pro forma net loss
|
|
$
|
(1,905,738
|
)
|
|
$
|
(224,316
|
)
|
On
April 5, 2017, the Company, through its wholly-owned subsidiary HealthDatix, Inc. consummated the acquisition of certain assets
of the CyberCare Health Network Division from EncounterCare Solutions Inc. (“ECSL”) in accordance with an Asset Purchase
Agreement by and among, HealthDatix, Inc., ECSL and the Company. Pursuant to the Agreement, ECSL sold, conveyed, transferred and
assigned to HealthDatix, Inc. certain assets, and HealthDatix, Inc. purchased and accepted from ECSL all rights, title and interest
in and to the Assets in exchange for 60,000,000 shares of restricted common stock of the Company, valued at $.10 per share. The
following table presents the preliminary allocation of the value of the common shares issued for ECSL to the acquired identifiable
assets:
|
|
Fair
Value
|
EHC software
and technology
|
|
$
|
2,500,000
|
|
FDA 510K clearance
|
|
|
1,396,000
|
|
Technology license
|
|
|
1,818,182
|
|
R&D - medical
wearable watch
|
|
|
285,818
|
|
Purchase price
|
|
$
|
6,000,000
|
|
Note
2 – Discontinued Operations
Sale
of Business
Effective
October 1, 2016, management decided to dispose of its subsidiary Arcmail and entered into a letter of intent on March 1, 2017
to sell Arcmail in a stock exchange to the CEO of Arcmail. On June 30, 2017, the Company completed the sale of ArcMail to Rory
T. Welch, the CEO of Arcmail (“Welch”) in accordance with a Stock Purchase Agreement (the “Purchase Agreement”)
by and between the Company and Welch. Pursuant to the Stock Purchase, the total consideration paid for the outstanding capital
stock of ArcMail is remittance of 10,000,000 shares of iGambit common stock previously issued to Welch. As per the Purchase
Agreement, the Company’s operations of ArcMail ended March 31, 2017 and Welch’s operation of the business is effective
as of April 1, 2017. Arcmail’s operating loss for the three months ended March 31, 2017 has been included in loss from discontinued
operations in the statements of operations for the six months ended June 30, 2017.
On
November 5, 2015, pursuant to an asset purchase agreement Gotham sold assets consisting of fixed assets, client and supplier lists,
trade names, software, social media accounts and websites, and domain names to VHT, Inc., a Delaware corporation for a purchase
price of $600,000. Gotham received $400,000 and commencing on January 29, 2016, VHT, Inc. shall pay twelve equal monthly installments
of $16,667 on the last business day of each month (the “Installment Payments” and each, an “Installment Payment”),
each Installment Payment to consist of (1) an earn-out payment of $10,000 (the “Earn-Out Payments” and each, an “Earn-Out
Payment”), and (2) an additional payment of $6,667 (the “Additional Payments” and each, an “Additional
Payment”); provided that VHT, Inc. shall only be required to make the Earn-Out Payments for as long as it maintains its
relationship with Gotham’s major client, unless it is dissatisfied with VHT, Inc. The terms of the installment payments
were fulfilled as of December 31, 2016.
The
assets and liabilities of the discontinued operations are presented in the consolidated balance sheets under the captions “Assets
from discontinued operations” and “Liabilities from discontinued operations”, respectively. The underlying assets
and liabilities of the discontinued operations as of June 30, 2017 and December 31, 2016 are presented as follows:
|
|
2017
|
|
2016
|
Assets:
|
|
|
|
|
Cash
(overdraft)
|
|
$
|
—
|
|
|
$
|
17,323
|
|
Accounts
receivable, net
|
|
|
756
|
|
|
|
321,033
|
|
Inventory
|
|
|
—
|
|
|
|
1,160
|
|
Prepaid
expenses
|
|
|
—
|
|
|
|
15,300
|
|
Property
and equipment
|
|
|
—
|
|
|
|
18,653
|
|
Total
assets
|
|
$
|
756
|
|
|
$
|
373,469
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
—
|
|
|
$
|
359,996
|
|
Accrued
interest on notes payable
|
|
|
—
|
|
|
|
558,183
|
|
Amounts
due to related party
|
|
|
—
|
|
|
|
64,509
|
|
Deferred
revenue
|
|
|
—
|
|
|
|
1,092,388
|
|
Notes
payable
|
|
|
—
|
|
|
|
3,119,001
|
|
Notes
payable - other
|
|
|
—
|
|
|
|
153,404
|
|
Note
payable - related party
|
|
|
—
|
|
|
|
626,266
|
|
|
|
$
|
—
|
|
|
$
|
5,973,747
|
|
The
components of loss from discontinued operations presented in the consolidated statements of operations for the six months ended
June 30, 2017 and 2016 are presented as follows:
|
|
2017
|
|
2016
|
Sales
|
|
$
|
386,157
|
|
|
$
|
993,701
|
|
Cost of sales
|
|
|
(29,462
|
)
|
|
|
(28,454
|
)
|
General
and administrative expenses
|
|
|
(326,247
|
)
|
|
|
(895,297
|
)
|
Depreciation
and amortization
|
|
|
(4,537
|
)
|
|
|
(12,386
|
)
|
Interest
expense
|
|
|
(92,848
|
)
|
|
|
(164,827
|
)
|
Loss
from discontinued operations
|
|
$
|
(66,937
|
)
|
|
$
|
(107,263
|
)
|
Note
3 – Summary of Significant Accounting Policies
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, HealthDatix, Inc., Wala,
Inc. and Gotham Innovation Lab, Inc. All intercompany accounts and transactions have been eliminated.
Use
of Estimates in the Preparation of Financial Statements
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Actual
results could differ from those estimates.
Fair
Value of Financial Instruments
For
certain of the Company’s financial instruments, including cash, accounts receivable, prepaid expenses, accounts payable,
accrued interest on notes payable, notes payable, and amounts due to related parties, the carrying amounts approximate fair value
due to their short maturities. Additionally, there are no assets or liabilities for which fair value is remeasured on a recurring
basis.
Revenue
Recognition
iGambit
is a holding company and has no sources of revenue.
HealthDatix’s
revenues are derived primarily from its Software as a Service (SaaS) offerings that are rendered to healthcare providers.
HealthDatix recognizes revenues when the products or services have been provided or delivered, the fees charged are fixed
or determinable, HealthDatix and its customers understand the specific nature and terms of the agreed upon transactions, and collectability
is reasonably assured.
Arcmail
recognizes revenue from product sales when the following four revenue recognition criteria are met: persuasive evidence of an
arrangement exists, an equipment order has been placed with the vendor, the selling price is fixed or determinable, and collectability
is reasonably assured. Revenues from maintenance contracts covering multiple future periods are recognized during the current
periods and deferred revenue is recorded for future periods and classified as current or noncurrent, depending on the terms of
the contracts.
Gotham’s
revenues were derived primarily from the sale of products and services rendered to real estate brokers. Gotham recognized
revenues when the services or products have been provided or delivered, the fees charged are fixed or determinable, Gotham and
its customers understood the specific nature and terms of the agreed upon transactions, and collectability was reasonably assured.
Advertising
Costs
The
Company expenses advertising costs as incurred. Advertising costs for the six months ended June 30, 2017 and 2016 were $1,196
and $0, respectively.
Cash
and Cash Equivalents
For
purposes of reporting cash flows, cash and cash equivalents include checking and money market accounts and any highly liquid debt
instruments purchased with a maturity of three months or less.
Accounts
Receivable
The
Company analyzes the collectability of accounts receivable from continuing operations each accounting period and adjusts its allowance
for doubtful accounts accordingly. A considerable amount of judgment is required in assessing the realization of accounts
receivables, including the creditworthiness of each customer, current and historical collection history and the related aging
of past due balances. The Company evaluates specific accounts when it becomes aware of information indicating that a customer
may not be able to meet its financial obligations due to deterioration of its financial condition, lower credit ratings, bankruptcy
or other factors affecting the ability to render payment. Allowance for doubtful accounts from discontinued operations was
$0 and $8,345 at June 30, 2017 and December 31, 2016, respectively. Bad debt expense of $0 and $63 was charged to discontinued
operations for the six months ended June 30, 2017 and 2016, respectively.
Inventories
Inventories
consisting of finished products are stated at the lower of cost or market and are presented in assets from discontinued operations.
Cost is determined on an average cost basis.
Property
and equipment and depreciation
Property
and equipment are stated at cost. Maintenance and repairs are charged to expense when incurred. When property and equipment are
retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts and any
gain or loss is credited or charged to income. Depreciation for both financial reporting and income tax purposes is computed using
combinations of the straight line and accelerated methods over the estimated lives of the respective assets as follows:
Office
equipment and fixtures
|
5 - 7
years
|
Computer
hardware
|
5 years
|
Computer
software
|
3 years
|
Development
equipment
|
5 years
|
Amortization
Intangible
assets are amortized using the straight line method over the estimated lives of the respective assets as follows:
Software
|
5 years
|
FDA
510K clearance
|
5 years
|
Technology
license
|
5 years
|
R&D
- medical wearable watch
|
5 years
|
Workforce
|
10 years
|
Customer
contracts
|
10 years
|
Goodwill
Goodwill
represents the excess of liabilities assumed over assets acquired of HealthDatix and the fair market value of the common shares
issued by the Company for the acquisition of HealthDatix. In accordance with ASC Topic No. 350 “Intangibles – Goodwill
and Other”), the goodwill is not being amortized, but instead will be subject to an annual assessment of impairment by applying
a fair-value based test, and will be reviewed more frequently if current events and circumstances indicate a possible impairment.
An impairment loss is charged to expense in the period identified. If indicators of impairment are present and future cash flows
are not expected to be sufficient to recover the asset’s carrying amount, an impairment loss is charged to expense in the
period identified. No impairment was recorded during the six months ended June 30, 2017.
Long-Lived
Assets
The
Company assesses the valuation of components of its property and equipment and other long-lived assets whenever events or circumstances
dictate that the carrying value might not be recoverable. The Company bases its evaluation on indicators such as the nature of
the assets, the future economic benefit of the assets, any historical or future profitability measurements and other external
market conditions or factors that may be present. If such factors indicate that the carrying amount of an asset or asset group
may not be recoverable, the Company determines whether an impairment has occurred by analyzing an estimate of undiscounted future
cash flows at the lowest level for which identifiable cash flows exist. If the estimate of undiscounted cash flows during the
estimated useful life of the asset is less than the carrying value of the asset, the Company recognizes a loss for the difference
between the carrying value of the asset and its estimated fair value, generally measured by the present value of the estimated
cash flows.
Deferred
Revenue
Deposits
from customers included in discontinued operations are not recognized as revenues, but as liabilities, until the following conditions
are met: revenues are realized when cash or claims to cash (receivable) are received in exchange for goods or services or when
assets received in such exchange are readily convertible to cash or claim to cash or when such goods/services are transferred.
When such income item is earned, the related revenue item is recognized, and the deferred revenue is reduced. To the extent revenues
are generated from the Company’s support and maintenance services, the Company recognizes such revenues when services are
completed and billed. The Company has received deposits from its various customers that have been recorded as deferred revenue
and presented as discontinued liabilities in the amount of $0 and $1,092,388 as of June 30, 2017 and December 31, 2016, respectively.
Stock-Based
Compensation
The
Company accounts for its stock-based awards granted under its employee compensation plan in accordance with ASC Topic No. 718-20,
Awards Classified as Equity,
which requires the measurement of compensation expense for all share-based compensation granted
to employees and non-employee directors at fair value on the date of grant and recognition of compensation expense over the related
service period for awards expected to vest. The Company uses the Black-Scholes option pricing model to estimate the
fair value of its stock options and warrants. The Black-Scholes option pricing model requires the input of highly subjective assumptions
including the expected stock price volatility of the Company’s common stock, the risk free interest rate at the date of
grant, the expected vesting term of the grant, expected dividends, and an assumption related to forfeitures of such grants. Changes
in these subjective input assumptions can materially affect the fair value estimate of the Company’s stock options and warrants.
Income
Taxes
The
Company accounts for income taxes using the asset and liability method in accordance with ASC Topic No. 740,
Income Taxes
.
Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax
bases of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be in effect when
the differences are expected to reverse.
The
Company applies the provisions of ASC Topic No. 740 for the financial statement recognition, measurement and disclosure of uncertain
tax positions recognized in the Company’s financial statements
.
In accordance with this provision, tax positions
must meet a more-likely-than-not recognition threshold and measurement attribute for the financial statement recognition and measurement
of a tax position.
Note
4 – Going Concern
The
accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business. The Company has disposed of its operating
subsidiary, Arcmail and has an accumulated deficit of $5,065,135 at June 30, 2017. These factors, among others, raise substantial
doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company’s
continuation as a going concern is dependent upon its ability to obtain necessary equity financing and ultimately from generating
revenues from its newly acquired subsidiaries to continue operations. The Company expects that working capital requirements will
continue to be funded through a combination of its existing funds and further issuances of securities. Working capital requirements
are expected to increase in line with the growth of the business. Existing working capital, further advances and debt instruments,
and anticipated cash flow are expected to be adequate to fund operations over the next twelve months. The Company has no lines
of credit or other bank financing arrangements. The Company has financed operations to date through the proceeds of a private
placement of equity and debt instruments. In connection with the Company’s business plan, management anticipates additional
increases in operating expenses and capital expenditures relating to: (i) developmental expenses associated with a start-up business
and (ii) marketing expenses. The Company intends to finance these expenses with further issuances of securities, and debt issuances.
Thereafter, the Company expects it will need to raise additional capital and generate revenues to meet long-term operating requirements.
Additional issuances of equity or convertible debt securities will result in dilution to current stockholders. Further, such securities
might have rights, preferences or privileges senior to common stock. Additional financing may not be available upon acceptable
terms, or at all. If adequate funds are not available or are not available on acceptable terms, the Company may not be able to
take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict business
operations
The
consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded
asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue
as a going concern.
Note
5 – Property and Equipment
Property
and equipment are carried at cost and consist of the following at June 30, 2017 and December 31, 2016:
Continuing
operations:
|
|
2017
|
|
2016
|
Office
equipment and fixtures
|
|
$
|
10,964
|
|
|
$
|
7,164
|
|
Less:
Accumulated depreciation
|
|
|
6,502
|
|
|
|
5,981
|
|
|
|
$
|
4,462
|
|
|
$
|
1,183
|
|
Discontinued
operations:
|
|
2017
|
|
2016
|
Office
equipment and fixtures
|
|
$
|
—
|
|
|
$
|
131,842
|
|
Computer
hardware
|
|
|
—
|
|
|
|
92,200
|
|
Computer
software
|
|
|
—
|
|
|
|
77,700
|
|
Development
equipment
|
|
|
—
|
|
|
|
35,318
|
|
|
|
|
—
|
|
|
|
337,060
|
|
Less:
Accumulated depreciation
|
|
|
—
|
|
|
|
318,407
|
|
|
|
$
|
—
|
|
|
$
|
18,653
|
|
Depreciation
expense of $522 and $236 was charged to continuing operations for the six months ended June 30, 2017 and 2016, respectively.
Depreciation
expense of $4,538 and $12,386 was charged to discontinued operations for the six months ended June 30, 2017 and 2016, respectively.
Note
6 – Intangible Assets
Intangible
assets from the acquisitions of HealthDatix and ECSL are carried at cost and consist of the following at June 30, 2017:
|
|
|
|
Life
|
Workforce
|
|
$
|
60,919
|
|
|
|
10
years
|
|
Software
|
|
|
156,925
|
|
|
|
5
years
|
|
Customer
contracts
|
|
|
644,846
|
|
|
|
10
years
|
|
EHC
software and technology
|
|
|
2,500,000
|
|
|
|
5
years
|
|
FDA
510K clearance
|
|
|
1,396,000
|
|
|
|
5
years
|
|
Technology
license
|
|
|
1,818,182
|
|
|
|
5
years
|
|
R&D
– medical wearable watch
|
|
|
285,818
|
|
|
|
5
years
|
|
|
|
|
6,862,690
|
|
|
|
|
|
Less:
Accumulated amortization
|
|
|
338,236
|
|
|
|
|
|
|
|
$
|
6,524,454
|
|
|
|
|
|
Amortization
expense of $338,236 was charged to continuing operations for the six months ended June 30, 2017.
Note
7 - Earnings (Loss) Per Common Share
The
Company calculates net earnings (loss) per common share in accordance with ASC 260 “
Earnings Per Share
” (“ASC
260”). Basic and diluted net earnings (loss) per common share was determined by dividing net earnings (loss) applicable
to common stockholders by the weighted average number of common shares outstanding during the period. The Company’s potentially
dilutive shares, which include outstanding common stock options and common stock warrants, have not been included in the computation
of diluted net income (loss) per share for all periods as the result would be anti-dilutive.
|
|
Three
Months Ended
|
|
Six Months
Ended
|
|
|
June
30,
|
|
June
30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Stock
options
|
|
|
8,463,000
|
|
|
|
1,718,900
|
|
|
|
8,463,000
|
|
|
|
1,422,000
|
|
Stock
warrants
|
|
|
400,000
|
|
|
|
275,000
|
|
|
|
400,000
|
|
|
|
275,000
|
|
Total
shares excluded from calculation
|
|
|
8,863,000
|
|
|
|
1,993,900
|
|
|
|
8,863,000
|
|
|
|
1697,000
|
|
Note
8 – Stock Based Compensation
Options
In
2006, the Company adopted the 2006 Long-Term Incentive Plan (the "2006 Plan"). Awards granted under the
2006 Plan have a ten-year term and may be incentive stock options, non-qualified stock options or warrants. The awards are granted
at an exercise price equal to the fair market value on the date of grant and generally vest over a three or four year period.
The Plan expired on December 31, 2009, therefore as of June 30, 2017, there was no unrecognized compensation cost related to non-vested
share-based compensation arrangements granted under the 2006 plan.
The
2006 Plan provided for the granting of options to purchase up to 10,000,000 shares of common stock. 8,146,900 options
have been issued under the plan to date of which 7,157,038 have been exercised and 692,962 have expired to date. There
were 296,900 options outstanding under the 2006 Plan on its expiration date of December 31, 2009. All options issued subsequent
to this date were not issued pursuant to any plan.
Stock
option activity during the six months ended June 30, 2017 and 2016 follows:
|
|
|
Options
Outstanding
|
|
|
|
Weighted
Average Exercise Price
|
|
|
|
Weighted
Average Grant-Date Fair Value
|
|
|
|
Weighted
Average Remaining Contractual Life
(Years)
|
|
Options
outstanding at December 31, 2015
|
|
|
1,718,900
|
|
|
$
|
0.03
|
|
|
$
|
0.13
|
|
|
|
3.82
|
|
Options
expired
|
|
|
(296,900
|
)
|
|
|
0.01
|
|
|
|
—
|
|
|
|
|
|
Options
outstanding at June 30, 2016
|
|
|
1,422,000
|
|
|
$
|
0.03
|
|
|
|
0.13
|
|
|
|
6.10
|
|
Options
outstanding at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
1,422,000
|
|
|
$
|
0.03
|
|
|
|
0.13
|
|
|
|
5.60
|
|
Options
granted
|
|
|
7,800,000
|
|
|
|
0.07
|
|
|
|
—
|
|
|
|
|
|
Options
cancelled
|
|
|
(759,000
|
)
|
|
$
|
0.03
|
|
|
|
—
|
|
|
|
|
|
Options
outstanding at June 30, 2017
|
|
|
8,463,000
|
|
|
$
|
0.07
|
|
|
$
|
0.07
|
|
|
|
7.91
|
|
Options
outstanding at June 30, 2017 consist of:
Date
Issued
|
|
Number
Outstanding
|
|
Number
Exercisable
|
|
Exercise
Price
|
|
Expiration
Date
|
June
9, 2014
|
|
|
213,000
|
|
|
|
213,000
|
|
|
$
|
0.03
|
|
|
June
9, 2024
|
June
6, 2014
|
|
|
250,000
|
|
|
|
250,000
|
|
|
$
|
0.05
|
|
|
June
6, 2019
|
March
24, 2015
|
|
|
200,000
|
|
|
|
200,000
|
|
|
$
|
0.01
|
|
|
March
24, 2020
|
April
6, 2017
|
|
|
600,000
|
|
|
|
600,000
|
|
|
$
|
0.03
|
|
|
April
6, 2027
|
June
6, 2017
|
|
|
700,000
|
|
|
|
700,000
|
|
|
$
|
0.0725
|
|
|
June
6, 2022
|
June
6, 2017
|
|
|
6,500,000
|
|
|
|
6,500,000
|
|
|
$
|
0.0725
|
|
|
June
6, 2027
|
Total
|
|
|
8,463,000
|
|
|
|
8,463,000
|
|
|
|
|
|
|
|
Warrants
In
addition to our 2006 Long Term Incentive Plan, we have issued and have outstanding compensatory warrants to two consultants entitling
the holders to purchase a total of 275,000 shares of our common stock at an average exercise price of $0.94 per share. Warrants
to purchase 25,000 shares of common stock vest 6 months after the Company engages in an IPO, have an exercise price of $3.00 per
share, and expire 2 years after the Company engages in an IPO. Warrants to purchase 250,000 shares of common stock vest 100,000
shares on issuance (June 1, 2009), and 50,000 shares on each of the following three anniversaries of the date of issuance,
have exercise prices ranging from $0.50 per share to $1.15 per share, and expire on June 1, 2019. The issuance of the compensatory
warrants was not submitted to our shareholders for their approval.
Warrant
activity during the six months ended June 30, 2017 and 2016 follows:
|
|
Warrants
Outstanding
|
|
Weighted
Average Exercise Price
|
|
Weighted
Average Grant-Date
Fair
Value
|
|
(1)
Weighted
Average Remaining Contractual Life (Years)
|
Warrants
outstanding at December 31, 2015
|
|
|
275,000
|
|
|
$
|
0.94
|
|
|
$
|
0.10
|
|
|
|
3.42
|
|
No
warrant activity
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
Warrants
outstanding at June 30, 2016
|
|
|
275,000
|
|
|
$
|
0.94
|
|
|
$
|
0.10
|
|
|
|
2.92
|
|
Warrants outstanding
at December 31, 2016
|
|
|
275,000
|
|
|
$
|
0.94
|
|
|
$
|
0.10
|
|
|
|
2.42
|
|
Warrant
granted
|
|
|
125,000
|
|
|
|
0.40
|
|
|
|
—
|
|
|
|
|
|
Warrants
outstanding at June 30, 2017
|
|
|
400,000
|
|
|
$
|
0.62
|
|
|
$
|
0.10
|
|
|
|
3.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Exclusive
of 25,000 warrants expiring 2 years after initial IPO.
|
Warrants
outstanding at June 30, 2017 consist of:
Date
Issued
|
|
Number
Outstanding
|
|
Number
Exercisable
|
|
Exercise
Price
|
|
Expiration
Date
|
April
1, 2000
|
|
|
25,000
|
|
|
|
25,000
|
|
|
$
|
3.00
|
|
|
2
years after IPO
|
June
1, 2009
|
|
|
100,000
|
|
|
|
100,000
|
|
|
$
|
0.50
|
|
|
June
1, 2019
|
June
1, 2009
|
|
|
50,000
|
|
|
|
50,000
|
|
|
$
|
0.65
|
|
|
June
1, 2019
|
June
1, 2009
|
|
|
50,000
|
|
|
|
50,000
|
|
|
$
|
0.85
|
|
|
June
1, 2019
|
June
1, 2009
|
|
|
50,000
|
|
|
|
50,000
|
|
|
$
|
1.15
|
|
|
June
1, 2019
|
January
1, 2017
|
|
|
50,000
|
|
|
|
50,000
|
|
|
$
|
0.25
|
|
|
October
10, 2021
|
January
1, 2017
|
|
|
50,000
|
|
|
|
50,000
|
|
|
$
|
0.50
|
|
|
November
7, 2021
|
January
5, 2017
|
|
|
25,000
|
|
|
|
25,000
|
|
|
$
|
0.50
|
|
|
January
5, 2022
|
Total
|
|
|
400,000
|
|
|
|
400,000
|
|
|
|
|
|
|
|
Note
9 – Convertible Debt
Convertible
Notes Payable
On
April 3, 2017, the Company entered into a Convertible Promissory Note with
an
accredited investor pursuant to an exemption under section 4(a)(2) of the securities act of 1933
,
pursuant to which the investor agreed to lend and the Company agreed to repay the investors the aggregate principal amount of
$125,000. The convertible note is due 12 months after issuance and bears interest at a rate of 12%. The Note is convertible into
shares of common stock of the Company 180 days following the date of funding and thereafter. The conversion price shall be subject
to a discount of 50%. The conversion price shall be determined on the basis of the lowest VWAP (Volume Weighted Average Price)
of the Common Stock during the prior twenty (20) trading day period. The Investor will be limited to convert no more than 4.99%
of the issued and outstanding Common Stock at the time of conversion at any one time. At any time during the period beginning
on the date of the Note and ending on the date which is 180 days thereafter, the Company may repay the Note by paying an amount
equal to the then outstanding amount multiplied by 135%.
On
March 30, 2017, the Company issued an 8% convertible note in the aggregate principal amount of $75,000, convertible into shares
of the Company’s common stock. The Note, including accrued interest is due January 15, 2018 and is convertible any time
after 180 days at the option of the holder into shares of the Company’s common stock at 65% of the average stock price of
the lowest 3 closing bid prices during the 10 trading day period ending on the latest complete trading day prior to the conversion
date.
Interest
expense on the convertible notes of $5,129 was recorded for the six months ended June 30, 2017.
Convertible
Debentures
The
Company issued convertible debentures to an individual during the six months ended June 30, 2017 and to two individuals during
the year ended December 31, 2016.
The
debentures are convertible into 75,000 shares of common stock for up to 5 years, at the holders’ option, at an exercise
price of $.50 and $.25, respectively. The debentures mature on the earlier of the closing of a subsequent financing event by the
Company resulting in gross proceeds of at least $10,000,000 or three years from the date of issuance. The debentures bear interest
at a rate of 10%. A beneficial conversion feature was not recorded as the fair market value of the Company’s common stock
was less than the exercise prices at the dates of issuance and through the end of the period. Interest expense on the convertible
debentures of $3,671 was recorded for the six months ended June 30, 2017.
Note
10 – Notes Payable
Notes
payable from continuing operations at June 30, 2017 consists of loans to HealthDatix from 3 individuals totaling $52,500. The
loans do not bear interest and there are no specific terms for repayment.
Notes
payable at December 31, 2016 are presented in liabilities from discontinued operations and consist of various notes payable in
annual installments totaling $779,750 through September 2019. The notes include interest at 7% and are secured by the assets of
ArcMail.
Principal
amounts due on notes payable for the years ended December 31, are as follows:
2017
|
|
$
|
779,750
|
|
2018
|
|
|
779,750
|
|
2019
|
|
|
779,750
|
|
2020
|
|
|
779,751
|
|
|
|
$
|
3,119,001
|
|
During
the year ended December 31, 2016, Arcmail entered into merchant financing agreements with various lenders for proceeds totaling
$395,583 payable in daily amounts based on various percentages of future collections of accounts receivable, which were assigned
to the lenders. The obligations will be satisfied upon total payments of $504,591 and will mature in March 2017. The outstanding
balance of notes payable - other was $153,404 and presented in liabilities from discontinued operations at December 31, 2016.
Note
11 – Stock Transactions
Common
Stock Issued
The
Company issued 200,000 common shares to a vendor in settlement of balances from prior years invoices plus interest, valued at
$.0725 per share on June 6, 2017.
The
Company issued 500,000 common shares for services, valued at $.09 per share on May 30, 2017.
The
Company sold 500,000 shares of common stock to an investor valued at $.05 per share on May 7, 2017 for proceeds of $25,000.
The
Company sold 1 million shares of common stock to an investor valued at $.05 per share on April 20, 2017 for proceeds of $50,000.
In
connection with the acquisition of assets from ECSL the Company issued 60,000,000 common shares valued at $.10 per share to the
shareholders of ECSL on April 3, 2017.
In
connection with the acquisition of HealthDatix the Company issued 15,000,000 common shares valued at $.07 per share to the shareholders
of HealthDatix on February 14, 2017.
The
Company sold 2 million shares of common stock to an investor valued at $.05 per share on January 27, 2017 for proceeds of $100,000.
The
Company issued 10,000 common shares for services, valued at $.08 per share on January 5, 2017.
Treasury
Stock
In
connection with the sale of Arcmail, the CEO of ArcMail remitted of 10,000,000 shares of iGambit common stock previously issued
to him, valued at $.10 per share on June 30, 2017.
Note
12 - Income Taxes
A
full valuation allowance was recorded against the Company’s net deferred tax assets. A valuation allowance must be established
if it is more likely than not that the deferred tax assets will not be realized. This assessment is based upon consideration of
available positive and negative evidence, which includes, among other things, the Company’s most recent results of operations
and expected future profitability. Based on the Company’s cumulative losses in recent years, a full valuation allowance
against the Company’s deferred tax assets has been established as Management believes that the Company will not realize
the benefit of those deferred tax assets.
Note
13 - Retirement Plan
ArcMail
has a defined contribution 401(k) plan, which covers substantially all employees. Under the terms of the Plan, Arcmail is currently
not required to match employee contributions. The Company did not make any employer contributions to the Plan during the six months
ended June 30, 2017.
Note
14 – Concentrations and Credit Risk
Sales
and Accounts Receivable
HealthDatix
had sales to two customers which accounted for approximately 64% and 32%, respectively of HealthDatix’s total sales for
the six months ended June 30, 2017. One customer accounted for 100% of accounts receivable at June 30, 2017.
No
customer accounted for more than 10% of sales included in discontinued operations for the six months ended June 30, 2017 and 2016,
respectively.
Cash
Cash
is maintained at a major financial institution. Accounts held at U.S. financial institutions are insured by the FDIC up to $250,000.
Cash balances could exceed insured amounts at any given time, however, the Company has not experienced any such losses. The Company
did not have any interest-bearing accounts at June 30, 2017 and December 31, 2016, respectively.
Note
15 - Related Party Transactions
Note
Payable – Related Party
ArcMail
issued a promissory note to the president of ArcMail on June 30, 2015 for funds advanced. The note is payable in annual installments
of $155,566 through December 2019 and is presented in liabilities from discontinued operations at December 31, 2016. The notes
include interest at 6% and are subordinated to the notes payable (see Note 12).
Principal
amounts due on notes payable for the years ended December 31, are as follows:
2017
|
|
$
|
155,566
|
|
2018
|
|
|
155,566
|
|
2019
|
|
|
155,567
|
|
2020
|
|
|
155,567
|
|
|
|
$
|
626,266
|
|
Amounts
Due to Related Parties
Amounts
due to related parties with balances of $0 and $508 at June 30, 2017 and December 31, 2016, respectively, consist of cash advances
from an officer/stockholder. These advances do not bear interest and are payable on demand.
Amounts
due to related parties with a balance of $64,509 at December 31, 2016, consists of cash advances from the president of Arcmail,
and is presented in liabilities from discontinued operations. These advances do not bear interest and are payable on demand.
Note
16 – Commitments and Contingencies
Lease
Commitment
The
Company is obligated under two operating leases for its premises that expire at various times through February 28, 2019.
Total
future minimum annual lease payments under the leases for the years ending December 31 are as follows:
2017
|
|
|
$
|
40,377
|
|
2018
|
|
|
|
56,743
|
|
2019
|
|
|
|
3,380
|
|
|
|
|
$
|
100,500
|
|
Rent
expense of $12,642 and $9,660 was charged to continuing operations for the six months ended June 30, 2017 and 2016, respectively.
Rent
expense of $10,807 and $21,637 was charged to discontinued operations for the six months ended June 30, 2017 and 2016, respectively.
Note
17 – Subsequent Events
Common
Stock Issued
The
Company sold 500,000 shares of common stock to an investor valued at $.05 per share on August 10, 2017 for proceeds of $25,000.
The
Company issued 250,000 common shares for services, valued at $.12 per share on August 10, 2017.
The
Company sold 1 million shares of common stock to an investor valued at $.05 per share on July 5, 2017 for proceeds of $50,000.
The
Company issued 50,000 common shares for services, valued at $.105 per share on July 5, 2017.